Project Report

1. A STUDY ON WORKING CAPITAL
MANAGEMENT AT TATA STEEL LIMITED
PINKEY GUPTA
14P6CMD092
Under the guidance of
Dr. K. T. SRINIVAS
ASSOCIATE PROFESSOR
COMMUNUTY INSTITUTE OF MANAGEMENT STUDIES
BANGALORE UNIVERSITY

2. Introduction about Tata Steel Plant
• Tata Steel Plant Established in 1907 as Asia's first integrated private sector steel
company, Tata Steel Group is among the top-ten global steel companies with an
annual crude steel capacity of over 29 million tonnes per annum.
• It is now the world's second-most geographically-diversified steel producer, with
operations in 26 countries and a commercial presence in over 50 countries. The
Tata Steel Group, with a turnover of Rs. 1, 48,614 crores in FY 14, has over
80,000 employees across five continents and is a Fortune 500 company.
• Tata Steel Plant Established in 1907 as Asia's first integrated private sector steel
company.
• Type of Company: It is a one of the leading public Limited Company, Steel
Manufacturing Company in India from Pre-Historical time to the modernized
competitive world of business.

3. Statement of Problems
• During Acquisition and merges or Diversification of company shifted its some of
the current assets like cash and bank balance to fixed assets, because of this
reason working capital of the company got affected like postponed dividend to
shareholder and also there were no sufficient current assets to fulfil the short term
obligation etc.,
• Some of the questions which strike the mind from observation of various
financial reports that how the company maintained the sufficient current assets to
meet its short term obligations for smooth running of the business after mergers
and acquisition. In this is back ground the present study is opted.

4. Need and relevance of the study
• Well-managed working capital is crucial to the running of a healthy and
successful business.
• An important part of working capital management is a company's cost structure.
Working capital represents the liquidity available to a business.
• In this background the present study is needed to know what the significance of
the working capital is for Tata Steel Limited, how the Tata Steel Limited managed
the working capital for smooth running of the business.

5. Objectives of study
1. To understand the need and significance of Working capital for the business.
2. To gain familiarity with various components of working capital in Tata steel
Ltd.
3. To find out the efficiency of working capital management in Tata steel Limited.
4. To find out the Financial ratios of working capital Management of Tata Steel
Limited
5. To compare the financial ratios of working Capital management of Major
Competitors of Tata Steel Limited.
6. To offer suitable suggestions based on findings of the study.

6. Scope of Study
The present study is confined to Working capital Management of Tata steel Limited
and also some of the select major competitors of Tata Steel Limited. The study covers
a period of four years from 2011-2012 to 2014-15.
Methodology of the study
• Type of Research: It is Descriptive Study.
• Data used: To achieve the aforesaid objectives data has been gathered from the
secondary sources Annual reports, journals, website etc.

7. DATAANALYSIS & INTERPRETATIONS
In year 2011-2012, Net Working Capital is Rs. 2548.2 Cr which depicts that the total
current asset is more than the total current liabilities. This means that cash & bank
balance along with inventories is more which is surplus of the creditors. In year
2012-2013, Net Working Capital is Rs. 1170.06 Cr which shows that it is declining
from the year 2011-2012 because of decrease in cash & bank with increases in
creditors. In year 2013-2014, Net Working Capital is Rs. -1403.54 Cr which shows
that creditors and provision are increased due to which cash & bank decline sharply.
In year 2014-2015, Net Working Capital is Rs. 1409.62 Cr which shows that there is
improvement in cash & bank reserve with decline in creditors.
Particulars 2011-2012 2012-2013 2013-1014 2014-2015
Net Working Capital
(A-B)
Rs. 2548.2 Cr Rs. 1170.06 Cr Rs. (1403.54) Cr Rs. 1409.62 Cr

8. Financial Ratios
1. Working Capital Turnover Ratio
2. Current ratio
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 13.32 32.65 -29.72 29.64
SAIL 3.17 3.48 4.42 -
JSW 8.87 11.88 -34.686 9.86
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 1.25 1.11 0.89 1.12
SAIL 2.33 2.12 1.77 -
JSW 1.34 1.26 0.99 1.32

9. 3. Quick Ratio
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 0.87 0.75 0.56 0.54
SAIL 0.88 0.55 0.45 -
JSW 0.85 0.83 0.58 0.73
4. Debtors Turnover Ratio/ Receivables Turnover Ratio
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 52.14 45.63 52.15 60.83
SAIL 52.1 50.3 59.3 -
JSW 42.9 52.6 49.8 44.7

10. 5. Debt Collection Period
6. Inventory Turnover Ratio/ Stock Turnover Ratio
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 7 8 7 6
SAIL 7 7 6 -
JSW 9 7 7 8
Company 2011-12 2012-13 2013-14 2014-15
Tata Steel Limited 23.51 22.28 21.12 17.40
SAIL 6.83 5.62 5.48 -
JSW 19.18 19.83 22.98 15.70

11. Findings of the Study
1. The company has an effective short term liquidity position and it should focus more in future to
improve this.
2. Jamshedpur steel plant follows a good credit policy of debtors but a risk of bad debts is always
present in high debtors.
3. Uneven trend in holding of raw material is a problem in Jamshedpur steel plant and this is
affecting the liquidity position of plant.
4. Jamshedpur steel plant had increased its loans and advances this depicts that plant is engaged in
modernization of machinery.
5. The management of the plant is successful in timely recovery of accrued interest from
concerned parties.
6. The holding period of finished and semi-finished product in Jamshedpur steel plant has
increased over the four years though the turnover has grown up .This kind of situation can cause
a major impact on liquidity of the company.
7. During the Financial Year 2014-15, the performance of the Company’s Indian operations was
adversely impacted by the regulatory uncertainties in the mining sector.

12. Suggestions for the Study
1. Tata steel plant should follow JIT (Just in time) technique of manufacturing.
This will help in minimizing blockage of funds.
2. The company should search for more source of raw material as it will reduce the
cost of production and improves profitability.
3. The management of plant should incorporate TQM (Total quality management).
4. The company should review its credit policy at frequent intervals as it helps in
reducing debtors and money can be used for other investment plans.
5. Tata steel plant should try to fix a standard in respect of holding period of raw
materials.
6. Tata steel plant should try to invest the excess cash balance after keeping the
required amount because holding of cash as idle is unproductive for the plant.

13. Conclusion
• While the Company faced challenges in its operations, especially due to the
mining crisis for most part of the financial year, it remained committed to
building the Greenfield steel plant in Kalinganagar project. The annual
assessment of fixed assets was undertaken during the Financial Year 2014-15,
taking into consideration the global economic environment, the changing
landscape of the global steel industry and raw materials.
• Financial Year 2014-15 has been a year of achievements despite the severe
impact of externalities. The Company was severely impacted by the raw material
(RM) crisis. For the first time in the over 100 year history of Tata Steel, it
operated with no captive mines for almost a quarter (2014-2015). However, the
Company was able to tide over the same through strategic and proactive cross-
functional planning. Reduction of production was curtailed to manageable levels.

14. LEARNING EXPERIENCE
• The study on Net Working Capital and its financial ratio enhanced my knowledge and
helped me horn my skills in order to understand how each and every ratio plays a vital
role in valuing any firm. While undergoing this study I come to know how different
financial ratios in Working Capital affect the financial performance of any company and
how they will boost the financial performance carry-on the dynamic activities.
• In Indian context, where an analyst has to rely upon the audited financial statement for a
particular company, the performance is to be judged from the financial statement only.
Therefore, it’s very important for today’s financial managers to have in-depth and
detailed knowledge of very basic of Working Capital Management for the financial
analysis of any company and indeed its need of the hour.

15. THANK YOU